David Miliband: I can certainly assure the hon. Lady not only that I make it a point to agree with what Deputy Prime Minister says, but that there is no stealth plan for the sort of abolition that she describes. On Monday, the Minister for Local Government, my hon. Friend the Member for Oldham, East and Saddleworth (Mr. Woolas) described the hon. Lady's colleague as the "Member for Scaremongering, South." I think that we have got a bit more of that today.

Daniel Kawczynski: The Government have set a target of building 500 affordable homes in my constituency, yet in April 2003, the local authority social housing grant was taken away, which was worth £1.85 million. Will the Minister please tell me how she expects Shrewsbury borough council to provide 500 affordable homes when that crucial grant has been taken away?

Yvette Cooper: The hon. Gentleman has asked a series of questions about that, and he has perhaps misunderstood the way in which the housing finance mechanism works. More investment is going into affordable housing, through the Housing Corporation and increasingly through the regional housing budgets, on which we will make an announcement shortly. So increased investment is available for new affordable housing. He is certainly right to suggest that we need to go further, and that is what we are doing over the next few years.

Simon Hughes: Given that last year, we had nearly 700,000 empty homes in England and nearly 100,000 in London, could the Government learn the lessons and apply the urgency, enthusiasm and focus that we have in had in our brilliant Olympic bid to reduce the number of empty homes? If so, could the Government follow the Select Committee recommendation of an annual report and recommendations and the urban taskforce recommendation of equalising VAT on new build and restoration?

Jim Fitzpatrick: I listened carefully to the suggestions that the hon. Gentleman has made in respect of the statistics that he quoted. Last year, there were 700,000 empty homes in England, but that figure was below 600,000 in 2004. Considerable progress has been made. The Office of the Deputy Prime Minister and local authorities are concentrating on the 300,000 homes that have been empty for more than six months. We have reduced VAT on homes empty for more than three years, and we have zero rated it for renovations for homes empty for more than 10 years. We are trying to ensure that there are fiscal incentives for empty homes to be brought back into the letting sector.

Andrew Gwynne: My hon. Friend will be aware of the superb job being done by New East Manchester in tackling the empty problems there. What discussions is his Department having with neighbouring authorities, such as Tameside and Stockport councils, to ensure that the very real problems of market failure do not spread into the adjacent areas?

Tony Baldry: Under the proposed distribution formula, Oxfordshire will lose more than 60 per cent. of its supporting people grant, which will hit some of the most vulnerable people, such as the chronically mentally ill who live in supported accommodation. It will affect support services in hostels for homeless people and support for people with learning disabilities. Why do the Government introduce a programme such as supporting people only then to turn round almost immediately and pull the rug away from us in Oxfordshire, thus leaving us in a position in which many of the most vulnerable people who had hoped and expected to get an improvement in their lives now see those hopes being dashed?

Michael Ancram: The Deputy Prime Minister's view of "handsome" and mine are obviously somewhat different. His party was elected to government on a 35 per cent. share of a 65 per cent. turnout of electors—the lowest winning level in history. In England, his party got fewer votes than our party. If he had any respect for the British people, he would show a little humility.
	May I at least welcome the fact that the Deputy Prime Minister takes seriously the horrors and gravity of the human rights abuses in Zimbabwe? Why on earth then is this Government still trying, without due safeguards, to send Zimbabwean asylum seekers in fear of their lives back to the blood-stained hands of Mugabe and his thugs?

John Prescott: The hon. Gentleman should take into account what happened to dentistry under the previous Administration. The Tories closed down two training schools, and introduced a new contract that drove most dentists into the private sector. We have been trying to deal with those difficulties. Let me give him some facts. The number of primary care dentists has gone up from 16,700 in 1997 to over 20,000. Our target to recruit the equivalent of 1,000 dentists by October will mean 2 million more people can be treated. Those are the improvements that we have achieved after the mess that we inherited. Fifty-three dental access centres provide treatment for over 400,000 people. We recognise the difficulties, but we are dealing with them and are making improvements. That was covered in a recent debate in the House, when it was made clear that major improvements are coming—not enough, but they are on the way. We are going in the right direction, because we believe in a national health service, not a privatised one.

John Prescott: We have put a tremendous amount of resources into policing. A target has been set, and we have increased the number of police officers by about 13,000 since 1997.
	The community support officers are very popular indeed. Already 6,000 have been appointed, and we hope to increase the number to 24,000. I have no doubt that Members discovered during the general election campaign that wardens and community support officers were very popular, and that there was a correlation with the lower crime figures.
	We think that what we are doing is right, and it is a priority for us. We are finding that it requires resources, but the Conservative party is committed to reducing them.
	7. Sir Peter Tapsell (Louth and Horncastle) (Con): Given his well-known commitment to European solidarity, can the right hon. Gentleman estimate the number of European leaders attending today's G8 summit who admire the statesmanship shown by our Prime Minister in helping to plunge Iraq into a chaos that the United States Defence Secretary thinks may last for 10 or 12 years?

David Davies: On a point of order, Mr. Speaker. You will be aware that last November the then Secretary of State for Health ordered a report into serious allegations that the British Pregnancy Advisory Service had been encouraging women to go to Spain to undergo abortions after 24 weeks. That report has now been completed and is with the current Secretary of State for Health. In response to several written questions about when that report will be published, however, she will only say that it would be inappropriate to comment further. Because of that, the Table Office refused to accept any further questions about the matter. Can you advise new Members how we can encourage Ministers to maintain that commitment to openness and transparency that they often trumpet, and how we can persuade them to publish the report and answer questions about it?

Patrick Cormack: I beg to move,
	That leave be given to bring in a Bill to amend the Representation of the People Acts in respect of deceased candidates.
	Obviously, I should begin by declaring a recent interest in this subject. May I also say to you, Mr. Speaker, and to Members in all parts of the House, how grateful I have been for the welcome that I have received on my delayed return to the House? Although I realise that that welcome has been genuine, it has also been partly prompted by the fact that every Member knows that there but for the grace of God could he or she have gone. I seek to save any colleague in any part of the House from having to face the sort of long ordeal that I had to face in May and June. I am grateful to the Minister of State, Department for Constitutional Affairs both for her helpful encouragement and for her presence here today.
	I shall explain briefly why I seek to bring in the Bill. On 1 May I became the victim of a law drawn up in an era when most election contests were either straight fights or three-cornered ones, before the proliferation of candidates that is now so common in almost every constituency.
	There are four main defects in the law. First, the party affected by the death of the candidate has no chance either to field a substitute or to withdraw from the election. Secondly, the law does not distinguish in any way between candidates. If any one of the Prime Minister's 14 opponents had died, right up until the declaration of his result, he could not have been elected on 5 May. And if Catherine Taylor-Dawson of the Vote for Yourself Rainbow Dream Ticket party had died, there would have been chaos in Wales. She obtained one vote—presumably her own—in Cardiff, North, but she also stood in all three other Cardiff seats, polling a total of less than 300 votes in all four. If she had died, Cardiff would not have been represented in the House at all—and I remember the day, in 1974, when the Government had an overall majority of four. Colleagues should reflect briefly on the consequences of such an action. And what if a single candidate stood against every Member for the Cabinet and then committed suicide? [Hon. Members: "Any volunteers?"] Those are all practical possibilities.
	Thirdly, the length of the delay is surely inordinate. Twenty-eight days after the proof of death the writ is reactivated, which gives a minimum of seven weeks' delay before the new election.
	Fourthly, new entrants are allowed into the field. Although the new election is supposed to be, and indeed legally is, part of the general election, new candidates who had not signified their original intention to stand are allowed to enter.
	My Bill does not propose to allow dead candidates to be elected, as in the United States, but I propose that the party affected by the death should have choice of withdrawing or substituting a candidate, and that if necessary, a delay of 72 hours would be allowed for the reprinting of ballot papers.
	I am also suggesting that the law should not apply to any independent candidate. An "independent" candidate—three of the Prime Minister's opponents were designated merely by that word—is by definition sui generis, unique, so if such a candidates dies, that is the end of the matter; nobody can substitute. That should not hold up an election. The law should not apply to any party that polled less than 10 per cent. in the constituency concerned at the previous general election, or less than 5 per cent. nationally, if the party did not contest the constituency concerned. That would solve the problem of maverick or mischievous candidates bringing constitutional chaos to the country. I also suggest that no candidate should be allowed to stand in more than one constituency.
	My final main proposition is that the delay between the death and the new polling day should in no circumstances be more than 28 days. Last time such a thing happened was in 1951, and in those days the law said that no more than 14 days should pass. Perhaps that timing was a little tight, but 28 days should be ample even for a major party to find another candidate.
	Finally, no new candidate who had not signified an intention to stand in the original election should be allowed to stand in the rescheduled election. Nor should any major party be allowed to substitute its original candidate without the certification of the returning officer that the reason is a genuine and acceptable one. I had a new Labour opponent and I am not suggesting that the reasons for the substitution were anything other than genuine and entirely acceptable, but I do not believe that substitution should be automatically allowed.
	As it stands, the law at the moment qualifies for Mr. Bumble's famous description that the law "is an ass". It needs changing because the case that I have illustrated has brought to wider public attention what can be done by mischief makers or malevolent people. I am most anxious that, before the next general election, we should have tidied up the law.
	What I am proposing is a partial repeal of that worst of all laws—the law of unintended consequences. I very much hope that all Members on both sides of the House will feel able to join me and my distinguished sponsors and give the measure a fair wind.
	Question put and agreed to.

Hon. Members: Hooray!

Dawn Primarolo: I should like to take the opportunity, on behalf of the House and the country, to thank all those involved in the preparation and delivery of a fantastic bid. I am sure that all of us look forward to welcoming the Olympics to London, to ensuring that this country represents itself and the Olympic spirit to the very best of our ability, and that it makes us proud.

Susan Kramer: Today, the Liberal Democrats and the Conservatives are speaking out together on inheritance tax. That must be an event almost as momentous as London's success in winning the Olympic bid. As a former London mayoral candidate, I welcome that success on my party's behalf.
	The new clauses address a matter that exercises us very much. The Bill breaks a principle, referred to in the past by my hon. Friend the Member for Bristol, West (Stephen Williams), that the Revenue should not go on fishing expeditions and seek information by intrusive means that does not apply directly to its ability to levy tax. The new clauses would remove the information requirement in relation to people who the Government do not believe should be subject to inheritance tax. The Bill would require them to fill out extensive forms at a time of great bereavement to prove that no tax should be paid.
	The Revenue's fishing expedition will expose almost no evidence of tax avoidance. The Chancellor has spoken with great pride on many occasions that only about 6 per cent. of the estates left after people die in this country are liable to inheritance tax. The vast majority are not liable, and I am sure that all parties share common cause that that should remain the case. The intrusive search for detailed information required by the Bill is therefore unacceptable.
	The concept of "excepted estates" applies to estates worth £275,000 or less, or to transfers to a spouse. That should be the appropriate benchmark, and we therefore associate ourselves with the new clauses.

Philip Dunne: I hope that the House will excuse the pun, but I have grave concerns about proposals to increase the powers of the nanny state. Her Majesty's Revenue and Customs has all-seeing powers over British taxpayers from the cradle to the grave, and now in the afterlife as well.
	I support new clauses 1 and 8 as a way to restore sanity to families and professionals who have to deal with the immediate effects of the afterlife and sort out estates after people die. That is a very distressing time, and the Government's introduction last year of statutory instrument No. 2543—the Inheritance Tax (Delivery of Accounts) (Excepted Estates) Regulations 2004—made it immeasurably more distressing. As my hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond) said, that order extended the requirement to file inheritance tax return form IT205—which he illustrated so eloquently—on all estates worth more than £5,000. Essentially, that requirement applies to every estate that requires probate.
	That is a huge extension of bureaucratic form filling. Previously, one could file a nil return for inheritance tax unless one was within £30,000 of the inheritance tax threshold. Now the form will have to be filed in respect of all estates of over £5,000, and very detailed information on the value of assets will be sought. That information will include details of household and personal goods, and so will require the valuation of the furniture and jewellery, for instance, in an estate. All of that information has to be provided after full inquiry has been made.

Philip Dunne: I am grateful for that correction, and my hon. Friend is right to say that it was possible for solicitors to swear an affidavit, although they could choose to file a nil return.
	The requirement would be reasonable if there was a good prospect that additional revenue would be raised, but my hon. Friend the Member for Runnymede and Weybridge has noted already that most estates will be below the threshold and so will not qualify. As a result, the proposal has no revenue-raising potential.
	What is the point of the proposed exhaustive form filling? How many people will be affected? My hon. Friend the Member for Runnymede and Weybridge has given some statistics, but I have some other data that might help Labour Members understand the implications of what is being proposed. About 535,000 people die each year. I learned that statistic in a debate on fallen livestock, when the subject of human death was touched on. Only 35,000 estates pay inheritance tax, so it does not take great mathematical skill to work out that, if all estates were to be affected by probate, a very significant number of people will be affected.
	Presumably, a not insignificant number of forms will land in the HMRC's offices, and will need to be checked. Some errors might be detected where there is a possibility that an estate goes over the threshold, but it is most likely that the forms will sit and gather dust after being collected. Therefore, many people in the bureaucracy will do very depressing work to no purpose.

Philip Dunne: My hon. Friend makes a good point. The HMRC work force is being reduced, so we should look carefully at the tasks that people there are asked to undertake. I hope that the Minister will consider that point.
	There is a wider point in respect of the extension of the inheritance tax net. House price inflation means that more and more people in my constituency are falling into its clutches, with estate values reaching the duty threshold despite the increase introduced in the Budget earlier this year. The Land Registry reports that the average price of properties sold in the south Shropshire district in the first quarter of the year was £208,000. In the Bridgnorth district, the average was £214,600. In the same period, the average price of detached houses—and that includes most of the village properties in my largely rural constituency—was £264,000 in south Shropshire and more than £307,000 in the Bridgnorth district council area. As a result, the average houseowner in my constituency is likely to be caught by the inheritance tax threshold.
	Inheritance tax was originally intended to be a tax for the wealthy. It is increasingly hitting the average householder across the country. That is certainly the case in the Ludlow constituency. It is time that we looked at the tax as a whole, and stopped tinkering with extending it at the edges.
	My final point has to do with the direction in which the Government are heading in respect of inheritance tax, which is in stark contrast to the direction that our major economic competitors are taking. I was in Washington DC last month and I discovered that legislation is passing through Congress and they are debating whether the American equivalent of inheritance tax—they call it death tax, rather starkly—should be scrapped or substantially reduced. If our major competitors are planning to scrap inheritance tax, we should think carefully about whether it is appropriate for us to extend the net. Instead, we should perhaps accept the increasingly competitive nature of the global economy in which we all live and consider scrapping inheritance tax.

Dawn Primarolo: I hope that when I explain how the process works now, he will realise that that question is based on a basic misunderstanding of what is required under the inheritance tax system. I am sure that he would accept that it is not unreasonable for any Government to require people to go through certain steps to ensure that the estate with which they are dealing should go through the excepted estates procedure, rather than the full inheritance tax procedure. That is all that is happening.
	I find it odd that the Conservatives did not struggle with this point last year, because all these procedures were in last year's Finance Bill—[Interruption.] I appreciate that the hon. Gentleman is a new Member, but his Front-Bench colleagues are not. There has been wide discussion of the issue and none of the suggestions made have caused any difficulties. Indeed, the connection with the Court Service is a further deregulatory measure that has helped enormously.

Dawn Primarolo: Thank you, Mr. Speaker. What the hon. Member for Runnymede and Weybridge thinks his new clause may do and what I am advised by my officials that it will do, on which basis I advise the House, is always a matter for debate when amendments are proposed, but I shall repeat what I have said.
	New clause 8 is apparently designed to give HMRC discretion over which details have to be given in those cases. The aim of both new clauses seems to be to reverse or modify the changes that the Government made last year, and to go back to the previous system whereby personal applicants—those not represented by a solicitor—had to fill in forms about the estate, whereas legally represented estates did not have to do so.
	The House may find it helpful if I provide some details about the administrative arrangements for such estates. The excepted estates procedure is a streamlined process for estates that are relatively small and relatively simple. If the estate qualifies, the executors are allowed to fill in a simple form and get probate immediately. Delivery of the form to the Court Service also satisfies their inheritance tax obligations, so they need have no direct contact with HMRC—so how having no direct contact with HMRC empowers HMRC to go on a fishing trip beggars belief. Executors otherwise have to fill in a much more comprehensive form and send it to HMRC before they can get probate. The process thus provides links with probate, which ensures that it would be speedy for small estates, and relates exactly to the point that the hon. Gentleman made about the importance of speed in such cases.
	The excepted estates procedure has always been restricted to estates that satisfy tests of size and complexity as set out in HMRC regulations. I think that we would all agree that eligibility should be limited in that way, as there is always a risk that large estates might slip through untaxed. We are getting the balance right by ensuring that there is speed for excepted estates, especially at probate, and that there is one point of delivery to the Court Service, with the ability to monitor the proper use of that process through HMRC.
	The questions for this afternoon relate to how executors should establish that they qualify for the excepted estates procedure and what they have to tell HMRC about their workings. Before I move on to the detail of the changes that the Government made last year, it may help the House if I briefly describe the probate and IHT reporting system as it stood before the changes made in 2004.
	Estates fell into three broad categories for reporting purposes. If the estate was worth more than £240,000, a full IHT return was required—not the short form in use at present. If the estate was worth less than £240,000 and the executor was a personal applicant, they had to fill in a short form very much like the one in use now. If the estate was worth less than £240,000 but a solicitor was acting for the executor, the executor simply had to swear an oath that the estate was worth £X,000 to demonstrate that it qualified for the excepted estates procedure. Under the old rules many executors had to fill in a full IHT return even though the estate paid no tax. The Government changed the rules last year primarily to bring most of those cases—about 30,000—into the excepted estates procedure, thereby reducing their compliance costs whether or not they were represented by solicitors. We moved them from the more complicated system to the excepted estates procedure. However, extending that procedure to bring in many more cases, many of them much bigger than those that were previously clearly eligible, increases the risk of non-compliance; so in striking the right balance, the Government took the opportunity to streamline the detailed procedure, improve co-ordination between HMRC and the Court Service, and update IHT protection against non-compliance.
	As part of that process, the Government unified the two existing procedures for executors using the excepted estates procedure, so that they all now fill in the same short form whether or not they are advised by a solicitor. As I said, the form contains the minimum number of questions needed to show that the estate is entitled to use the excepted estates procedure and to allow HMRC to make a risk assessment.
	The new clauses seem intended to reverse all those changes, so that some or all executors would be entitled to claim access to the excepted estates procedure without giving even basic information about the facts that would justify their using it. The Government's view is that that is misconceived. To qualify for the excepted estates procedure, executors have always been required to know the total value of the estate and key points about what it contains, and solicitors will always have to establish those basic facts.
	The form that executors must now fill in only sets out systematically the questions that solicitors have been asking their clients already, before putting them through the excepted estates procedure. They are already collecting such information to satisfy themselves that their clients could use the excepted estates procedure. To be fair to solicitors, the overwhelmingly majority of them clearly took those obligations seriously. However, there have been indications that there were issues on different occasions, but none has been demonstrated with the new procedure.
	To sum up, the uniformity the Government that built into the system in 2004 strikes the right balance. It is deregulatory. It unifies processes. It treats people equally. It ensures that the returns give the pertinent information only and are not excessive. It is fair to all taxpayers and to the Exchequer. It encourages executors to apply the same accuracy when completing the short form as they have done when filling out the full IHT return. On that basis, I suggest that hon. Members have no grounds to pursue the issue of fairness. I hope that, having heard the explanation of last year's changes and what they are achieving in the system, the hon. Gentleman will consider withdrawing the motion, but if he feels unable to do so, I will urge my hon. Friends to oppose the new clause.

Edward Balls: I am trying to understand the nature of the hon. Gentleman's proposal. In the case of Bank of England, we decided that independence was the right thing. In the end, with the support of Opposition Members—it took a little time—we decided that it was right to hand over the power to take month-by-month interest rate decisions to a group of independent experts. There is a material difference, however, between making monetary policy decisions with a single instrument and a single target and tax policy decisions. The hon. Gentleman is proposing to move tax policy decision making away from the House of Commons and elected Members of Parliament and instead asking independent experts to make policy decisions about tax. Is he proposing that Parliament should give up power in that way, not merely to unelected Members of the other place but to entirely unelected individuals?

Theresa Villiers: It is always difficult to draw a clear line between technical changes and policy, but the commission would make recommendations, they would be debated in the House and we would decide whether we wanted to go in that policy direction or not. It is as simple as that. The commission would make recommendations to simplify the system.
	The tax system of any modern economy will be complex, but ours has reached heights of Byzantine complexity. The Finance Act 2004 holds the record for being the longest, with 328 sections and 42 schedules. The standard textbook on tax law hits the bookshops as a behemoth of about 11,000 pages. We need to address the problem urgently for a number of reasons, the first of which is lack of transparency, which my hon. Friend the Member for Cities of London and Westminster spoke about.
	Complexity is such that the tax system is incomprehensible to the vast majority of ordinary people, and fairly unintelligible even to the most numerate of taxpayers. That is damaging for our democracy. People should be entitled to understand with clarity how much they are taxed, why they are being taxed and on what they are being taxed. Complexity also increases costs for taxpayers: it is costly for them to get the professional advice that they need to complete their tax returns and the paperwork needed to ensure that they are paying the correct amount of tax. The taxpayer suffers a double hit, because the public purse is put under pressure by the need to employ more civil servants and bureaucrats to tackle the complexity of the system.
	Ministers will no doubt say that detail and the dense text of our tax law is needed to give certainty. In fact, complexity can lead to less certainty as people find it increasingly difficult to understand the tax system. That is made worse by the Government's refusal to accept any form of pre-authorisation scheme, as urged on them by the Opposition. Furthermore, complexity can produce more opportunities for aggressive and artificial avoidance mechanisms. The more complex the system, the more places there are to hide. That leads to more complex anti-avoidance provisions, producing a vicious circle of complexity.
	A complex, opaque and uncertain tax system deters foreign investment and drives jobs offshore in a globalised economy. A simplified, rational, coherent tax system is a magnet for jobs and employment, so our competitiveness is under threat from a tax system that is overly complex.Lastly, tax simplification will enhance our democracy.

Stephen Williams: I had not intended to speak, but I shall contribute briefly to the debate. Among the Members present, I probably have the unique experience, having spent the past 15 years in the profession, of seeing Finance Bills from the other side of the fence, and for the past month or so of seeing how the Finance Bill is put into practice as a legislator.
	With every Finance Bill that is published, various institutes have to publish commentaries. My own institute, the Chartered Institute of Taxation, will shortly send, with a large thud through my letterbox at home, a commentary on the present Finance Bill when it is enacted. The Treasury publishes its explanatory notes, and we all miss the presence of the hon. Member for Wolverhampton, South-West (Rob Marris) to point out aspects of the notes to us. Many other bodies and individuals will offer expert commentaries on the Bill.
	Earlier speakers referred to the remit of the tax law rewrite committee that has been established for some time. As I understand it, the committee's original remit of was to render into plain English the existing body of tax law. If the committee came across inconsistencies in the English while it was doing that, it would point them out, but its remit was not to rewrite the meaning of that tax law.
	From what the hon. Member for Normanton (Ed Balls) was suggesting, this proposal is quite different. In no way does it conflict with the work of the tax law rewrite committee. There is a need for some standing commission to examine tax law as it accumulates with every Finance Bill—this year there have been three, in total—to make sure that the legislation that we have in place works for a modern 21st century economy.

Mark Field: I suspect that the consideration of clause 4 always brings out a certain sensitivity in Labour Members. However, I thank the Financial Secretary for his considered reply.
	As ever, my hon. Friend the Member for Chipping Barnet (Mrs. Villiers) made an excellent contribution based on her great experience as a Member of the European Parliament. She rightly stressed the uncertainty and complexity that has crept into domestic tax law. Let us be honest: that has not happened only in the past eight years; the problem goes back many years. However, as I said earlier, there has been no consolidation measure since 1988.
	I thank the hon. Member for Eastleigh (Chris Huhne) for his support. I must make a small confession about his somewhat belated entry into the House. I first voted in the 1983 general election when I lived in my home town of Reading. The constituency was Reading, East and the SDP/Alliance candidate was none other than the hon. Gentleman. Four years later, when I was at university in Oxford, in the constituency of Oxford, West and Abingdon, the hon. Gentleman was also the candidate. I hope that he will not move to the Cities of London and Westminster because that would make it a hat trick.
	I thank the hon. Member for Bristol, West (Stephen Williams) for his brief contribution, despite his exposure of the fact that not all the thoughts that I expressed were entirely mine.
	I accept the Financial Secretary's comments about the second Chamber. My remarks were slightly obiter dicta. I simply tried to speak a little about modernising the House of Lords and part of the contribution that it could make. I did not suggest that it could do fundamentally more than perhaps considering aspects of financial and tax legislation. However, I accept that many of the concerns that we have expressed go back beyond 1910. I know from my role as Member of Parliament for the City of London about the privileges that exist to this day in the City. In this place, they relate to financial power having moved away from only one side of Parliament.
	I accept that complexity is a two-way street. Inevitably, accountants, tax advisers, lawyers and so on have a large vested interest. However, the Financial Secretary rushed too quickly over my earlier point that the obscurity and complexity of many new laws and regulations on tax encourage avoidance.
	Conservative Members believe that it is high time for a review, although I accept the good nature of earlier comments. I therefore believe that we should vote on the new clause.

Philip Hammond: I beg to move, That the clause be read a Second time.
	New clause 5 addresses an anomaly—indeed, I might call it an injustice—that is estimated to affect about 30,00 people, and which we believe was not intended to arise. We recognise that there may be ways of achieving the relief that the new clause seeks other than amendment of the underlying primary legislation, but this is the route that we have chosen. I hope that I shall be able to secure a commitment from the Paymaster General, if not to accepting the new clause as drafted, at least to providing relief from the double charge that I shall describe by whatever means the Revenue finds most appropriate, so that those 30,000 people can get on with their lives with some certainty about their position in relation to inheritance tax.
	If I might indulge in a little background history, the House will recall the closing of an inheritance tax avoidance scheme involving pre-owned assets in the 2004 Finance Act. The scheme, used by many families, essentially involved disposing of the family home while retaining the right to live in it. It relied on the creation of two trusts to avoid the rule that would make a transfer ineffective for inheritance tax purposes where an interest—the right to continue living in the house—was retained when the gift was made.
	Under the scheme, the house, rather than being given away, was sold to a trust—let us call it trust one—at an arm's length price in exchange for an IOU. Because that was an arm's-length market price transaction, it had no inheritance tax implications—the individual had simply swapped assets in the form of a house for an IOU. Then came the clever bit—the IOU was gifted to a second trust for the benefit of the donor's children, that being a trust in which the donor had no interest. Thus the gift of the IOU to the second trust became a potentially exempt transfer—if the donor survived seven years from the date of the gift, no inheritance tax would be payable. Of course, the gift of the house to the children's trust would also be a potentially exempt transfer, and if the donor survived seven years, no inheritance tax would be payable, but only if the donor retained no interest in the house. If the donor wanted to live in the house, that route would not work for inheritance tax purposes, and the use of the double trust device allowed the potentially exempt transfer benefit to be obtained while retaining a lifetime interest in the house for occupation.
	Let us be clear: that was a convoluted, although legal, piece of tax planning, prompted by the ever-widening net of inheritance tax. That tax was originally intended to capture the estates of the wealthy on death. The threshold has been allowed to reduce in real terms in relation to the value of the principal assets that make up modest estates—people' houses—to the extent that in my constituency and, I am sure, in many other parts of the country, an estate comprised solely of a three-bedroomed former council house will be caught by what has become the greatest stealth tax of all, a tax which, until recently, ordinary people did not have to bother themselves about.

Philip Hammond: My hon. Friend makes two very good points. Clearly, it was not the intention of inheritance tax when introduced to hit the estates of modestly-off people—it was a tax at death on the estates of the wealthy, and was originally conceived as a tax on land. Its scope is now far wider than was originally intended, and it has become one of the great stealth taxes, largely because of the rapid increase in house prices.
	My hon. Friend makes another excellent point: its incidence is not evenly distributed across the country because of the historic disparity in the rise in house prices and the level of house prices. People on average incomes in parts of the south-east, London and eastern England are likely to be caught by the tax, and people on average earnings in other parts of the country are much less likely to be caught by it, because of the less rapid escalation in the value of their housing assets. That is another aspect to the unfairness of using fiscal drag as a way of expanding the scope of a tax.

Philip Hammond: My right hon. Friend is right. Those of my hon. Friends who have had the opportunity of serving on the Finance Bill Committee, and those who served on previous Finance Bills, will know that the Paymaster General will make a great case for the distinction between retrospectivity and retroactivity. She will say that the measure was not retrospective, although it was retroactive. I am afraid that the effect on the taxpayer is exactly the same.
	In the Finance Act 2005, the Government called time on this particular scheme, not by attacking inheritance tax planning directly but by levying an income tax charge on the value of the benefit from the retained interest in the house sold at arm's length to the first trust. That caused considerable anguish and anger because of the retroactive nature of the legislation—imposing a new tax on a series of difficult-to-reverse transactions, some of which had been in place for nearly two decades when the measure was introduced. There was a large-scale gnashing of teeth at the time. Now that the dust has settled, most taxpayers accept that the game is up, and that the schemes that they have expensively set up have failed for the purpose that they set them up, and that those schemes should now be dismantled. That is what most taxpayers confronted with this new income tax charge want to do. Therein lies the problem that we seek to address with new clause 5.
	The Government action under the Finance Act 2004 was devastatingly effective. It completely removed the economic benefit of the schemes, and the Government's objective would be achieved by the dismantling of the schemes. Unfortunately, in doing so, the taxpayer is subject to a huge risk of a double taxation charge. The Government have provided a protected exit route from such schemes. Regulations under the Finance Act 1986 provide some protection against double charging, and regulations that were made earlier this year, under schedule 15 to the Finance Act 2005—a measure targeted to deal with a problem that had already been recognised—provide for those who have set up such a scheme to avoid the income tax charge by making an election, which essentially makes the whole establishment of the double trust transparent for inheritance tax purposes. The trusts therefore remain in place, but the house, notwithstanding its sale, is treated as a chargeable asset, and the relief is given on the lesser in value of either the house or the debt due from the children's trust on death. No double charge to tax would therefore arise.
	That is a de facto unwinding of the situation from an economic not a legal standpoint. It has been an effective way out of the mess for many ordinary middle-income families, leaving them bruised by the expense and stress of setting up and then unravelling the scheme but otherwise intact, while protecting the Exchequer at the same time by ensuring that the same inheritance tax is payable as would have arisen in the absence of the scheme.
	There are good reasons, however, why the election route under regulation 6 of the snappily named Charge to Income Tax by Reference to Enjoyment of Property Previously Owned Regulations 2005 is not an appropriate route for most people. First, the ownership of the property is left unchanged—the economics of the scheme are addressed but not ownership, so that while the house will be charged to inheritance tax in the donor's estate, the debt, which has been gifted to the children's trust, remains in existence and will eventually give rise to a tax charge on the children who are the beneficiaries of the children's trust.
	Secondly, most people not unnaturally feel that, if they have come out with their hands up, unravelled the arrangements that they have made and accepted that they will remain liable to inheritance tax on their house—the asset originally intended to be protected—there should not then remain in existence what is effectively a debt due from them to the children's trust that they have established.
	Thirdly, and perhaps most importantly, for technical reasons, an election under regulation 6 by a married couple will give rise to an inheritance tax charge on the first death rather than, as is normally the case with a married couple, on the second death. That does not alter the total inheritance tax due on the house, but it can cause serious cash-flow problems for the surviving spouse, and may possibly even require the sale of the house on the first death.
	That cannot—at least, I hope it cannot—have been the Government's intention. Given the problems that I have outlined, the obvious route for such people is to unwind the scheme rather than take advantage of the right to make an election under regulation 6. Unwinding the scheme would involve the trustees of the children's trust advancing the debt to the beneficiaries and the beneficiaries then releasing or writing off the debt due to them, so the position would revert to what it had been before. Mr. and Mrs. A would no longer hold the house subject to a debt but would be fully liable to inheritance tax on its value, while escaping the income tax charged on pre-owned assets.
	The difficulty is that, if either Mr. or Mrs. A, or both of them, die within seven years of the original gift of the debt to the children's trust, they face two lots of inheritance tax, one on the failed potentially exempt transfer represented by the gift of the debt and one on their share of the full value of the house. Two inheritance tax charges will be made on what is essentially the same economic value.
	Before this year's regulations were made, that problem also arose if people made an election under the Inheritance Tax (Double Charges Relief) Regulations 1987. However, regulation 6 of the 2005 regulations now relieves from a double taxation charge the estates of people who die within seven years of the original gift of the debt having made the election under regulation 7.
	Unfortunately, the same treatment does not extend to people who unwind arrangements completely. Our purpose is to seek a commitment to close that unintended trap—at least, I hope it was unintended—for unwary people seeking to comply with the changed rules by unravelling the schemes that they set up before the Finance Act 2004.
	New clause 5 seeks to amend the underlying primary legislation—the Finance Act 1986, under which the original relief was available—to address the circumstances that I have identified, by inserting new section 104A. In practice, that would extend to people who die within seven years of unwinding a scheme by writing off or releasing the debt, the same relief as applies to those making an election. It would do that by requiring two separate calculations of the tax due—in respect of the debt and in respect of the house—and requiring the lower valuation to be reduced to nil, and the higher amount to be payable. Essentially, that is the same procedure as required under regulation 6 of the 2005 regulations for people who have made an election.
	Subsection (2)(d) of proposed new subsection 104A, providing that the double taxation relief would be available only if the release of the debt was being made other than for full-value consideration, would ensure that the new clause could not become a tax avoidance mechanism in itself. The relief would operate whoever released the debt. In the example that I have used, it would be the children who were the beneficiaries under the children's trust. The debt would have to be advanced to the beneficiaries, because only they could readily give a discharge of the debt from the settlor. The trustees cannot write off the debt, because to do so would confer a benefit on the settlor, who would have been excluded by the terms of the original trust deed when it was set up for the original purpose.
	For whatever reason—I suspect it is largely because of the pressure of the growing net of inheritance tax—ordinary people have been lured into complex tax planning by the iniquitous tax drift that has turned IHT into the biggest stealth tax. Retroactive legislation has been imposed on them, and most of them have now accepted that the schemes into which they entered are ineffective, and they want to unwind them, thus giving effect to the Government's intentions. However, they find that they cannot do so without incurring a real risk of double taxation which, even without taking into account the costs of setting up and dismantling the scheme, would leave them significantly worse off.
	We must not forget that, as my right hon. Friend the Member for Suffolk, Coastal (Mr. Gummer) said, those schemes were perfectly legally tax planning when they were set up. Indeed, they remain so, although they have been economically neutered. Ordinary people seeking to comply with the changed rules should not be penalised by modest estates being put at risk of a potential 80 per cent. tax charge on the surplus value of the estate over the IHT threshold if both the debt and the house are charged to IHT.
	Even with the proposal for relief that we suggest in new clause 5, there would still be considerable downside risk for the taxpayer seeking to unwind such a scheme. First, a beneficiary of the children's trust will suffer inheritance tax if he dies within seven years of the debt being written off. Secondly the position for married couples who leave their property to each other on the first death, within seven years of the original gift, will remain unsatisfactory. For example, if Mr. A dies within seven years of the original gift of the debt, the potentially exempt transfer will become chargeable, even with double charge relief. On Mrs. A's death later, the full value of the house would become chargeable, so in effect, Mr. A's share will be taxed twice.
	Perhaps that will be sufficient to satisfy the Paymaster General's well-known penchant for putting into the tax system deterrents to legal tax planning. However, even with those remaining penalties, new clause 5 would greatly improve the position of the group of taxpayers who are seeking to unwind schemes and get on with the rest of their lives. I therefore appeal to her sense of compassion. Many thousands of people, the vast majority of whom will never have indulged in any form of serious planning before, and the vast majority of whom will have no wish to go near any form of tax planning ever again, have been caught in this trap.

Philip Hammond: I would prefer to say that tax planning is perfectly legal. As our tax code has developed, the more convoluted forms of avoidance, while not illegal, are certainly subject to action by the Revenue. We have acknowledged during the Bill's passage that there is a constant game of cat and mouse. The Paymaster General expressed the view in Committee that she did not want to have to engage in a constant game of cat and mouse, but that, I fear, is the lot of Paymasters General, who are constantly pursuing a moving goal. Tax planning will move on and the Government and the Revenue will seek to close down the more convoluted and artificial tax-avoidance schemes. That is their right. The concern on this side of the House has always been about the degree of retroactivity in seeking to close down such convoluted tax-avoidance opportunities.
	I hope that the Paymaster General will be able to say something positive to this group of 50,000-odd people who are seeking simply to get on with the rest of their lives, having recognised that what they did in the past was unwise and has certainly not delivered any benefit. Indeed, many families have been put through enormous stress, and we are not talking about wealthy individuals with complex affairs. Many are just ordinary families. Those people are now fearful of taking any action until the Revenue confirms that there will be no double tax charge. The longer the delay in releasing the debt and unwinding the scheme, the more income tax will have to be paid on the deemed charge equal to the value of the rent of the property that they continue to live in.
	In fairness to those ordinary families, I hope that the Paymaster General will be able to accept new clause 5. If not, I hope that she will at least confirm unequivocally at the Dispatch Box today that the Government will either amend the regulations or take appropriate alternative steps to allow those schemes to be quickly and effectively unwound so that there is an alternative route for those people for whom election under regulation 6 is not an appropriate exit. They should be able to unwind their schemes without undergoing the huge potential costs that the current regime imposes on them.

John Gummer: That is not only true but self-evident. I do not wish to go down that line, but I do notice that whenever one talks about the importance of the family, of stability, of passing on what one generation has worked hard for, not a grimace but an expression of laughter appears on the faces of particular Labour Members. They laugh because they do not really understand what it is that has kept the nation stable over the generations, and which also motivates most people.
	Anyone of my age who asks their friends why they are still working will discover that they are doing so because they believe that it is contributing to the continuity of their family and to the well-being of the children and grandchildren whom they care about. A state that does not take that into account is very mistaken.
	This issue is important in the context of the new clause, and for two fundamental reasons. First, let us consider a situation in which someone has sought properly and in reasonable terms to make their affairs as least taxable as is proper within the regime, but who then finds that although they have done nothing illegal—indeed, the courts supported their action—they are penalised according to the vague view that everybody ought to pay as much tax as they possibly can, rather than as little as they are legally liable to pay. Such a situation undermines people's respect for the tax system. Asking people to find new ways in which to make themselves taxable does not constitute a proper tax system.
	A proper tax system recognises that although people have to pay the tax for which they are liable—they might choose to vote for a party that reduces tax—they should have no reason at all to fear that if they arrange their affairs so that, perfectly properly and legally, they pay less tax than if they had arranged them otherwise, they will be penalised, including retrospectively. I do not want to discuss retrospectivity, but I should point out that I realise that the Paymaster General, whose definition of retrospectivity is wrong in both dictionary and moral terms, does not want to turn retrospectivity into a punishment in this regard.
	I turn to the second and equally important issue. If people feel that they are no longer being treated fairly by the tax system, those who have always been law abiding will be less so. The fairness of a system is crucial to widespread support for it, and to objections against those who break the law. I offer a direct comparison. It is much easier to get the sympathy of one's neighbours if one drives a motor car at 32 mph in a 30 mph limit in the middle of the night than if one drives over the drink limit. The reason why is that everybody recognises—indeed, there has been a very good bipartisan campaign—that drinking and driving is dangerous and unacceptable socially. Therefore, peer pressure is very strong and properly so, particularly and noticeably among young people. If one breaks the speed limit in the circumstance that I described, people tend to feel, "Well, it was the middle of the night and nobody was around." Such an act is certainly illegal, and of course the law has to obeyed and applied. But my point is that once there is a feeling of unfairness, the social and peer pressures reduce.
	I want a tax system that is so clear, obvious and open that people believe that—whether or not they like the tax, the Government or the Paymaster General—they ought to pay it. That seems to me to be right. If they want that system changed, they should find, through the democratic system, somebody who is prepared to change it. The Paymaster General has presided over such a complication of the tax system that ordinary people with limited resources must now take legal and tax advice in a way that they never had to before.
	I have said what I am about to say before, and I will go on saying it. I hope that the Paymaster General will accept it, as it is not a personal comment, but she has been in the Treasury team for a long time. Under the tax system that we now have, ordinary people who own a house that has risen in value and who earn income from more that one source need technical advice that their predecessors in history never needed. The right hon. Lady must put that and some other problems right. Above all, she must try to make things simpler. That would be very good for the nation, but very bad for accountants.
	One of the lesser purposes of this House is to make life difficult for accountants. If she can do that with this measure—and at the same time ensure that lawyers also have less work—I should be very pleased.

Dawn Primarolo: In debates such as this, it is important to bear in mind the specifics of the matter in question. That is preferable to taking a trip down the highways and byways of the individual views held by hon. Members. Today, we are discussing the tax system, and I want to respond to the points raised by the hon. Member for Runnymede and Weybridge (Mr. Hammond) in respect of new clause 5.
	Before I do so, however, I want to put something on record. I know that the hon. Member for Runnymede and Weybridge knows this, but I want to make sure that other hon. Members are also aware of the situation. New clause 5 refers to a specific action that the Government took to close double trust avoidance arrangements.
	Those arrangements are very complicated, and people do not fall into them in error. Double trusts are expensive to set up, and they benefit people who want to remove £500,000 or more from inheritance tax liability, under rules that have been in place for a very long time. The arrangements apply to houses, but also to works of art, furniture and an amazing range of items. In this rather simplified presentation, however, I shall use houses as my example.
	Under the double trust arrangement, people would give their house to a trust. The trust then owns the house but the deal is a paper transaction only and so no money changes hands. The trust pays with what is, in effect, an IOU, but that IOU cannot be kept by the house's original owners. Therefore, it is put into another, unconnected, trust. The original owner has neither the property nor the income from it, but is able to continue living in it, even though it has been removed entirely from the inheritance tax regime.
	The Government took various steps to change the arrangements. The classic way to deal with an anti-avoidance arrangement—to which some Opposition Members object—is to introduce complex legislation targeted specifically on removing the possibility of avoidance. This time, however, the Government decided to take a different route and say that people could elect out of existing arrangements. The hon. Member for Runnymede and Weybridge spoke about unwinding, and I shall return to that later, but the Government's approach meant that people did not have to unwind arrangements that they had entered into.
	As a result, people could claim, "Fair cop. We shouldn't have tax planned. We didn't mean to do it or for it to carry on into the future. We understand the point that the Government is making." If they did that, people only had to tell the Government that the double trust scheme had been cancelled. By electing out in that way, people could get back to where they should be in the inheritance tax system. That is all that we are discussing.
	The hon. Member for Runnymede and Weybridge gave a long explanation of various possibilities. Sometimes such trusts are set up for children, and complications arise about the age of the children and whether they can be beneficiaries. The hon. Gentleman made a point about the sequence of events, but the lesson is that anybody who is foolish enough to go in for complicated tax planning must understand how the rest of the tax system might impinge on that planning.
	The hon. Gentleman raised the issue of the IOU in the second trust, depending on who died first and the age of the children, and the possibility that the spouse may be subject to charges if the IHT charge comes in earlier than expected. That point has been raised with us before, and officials at HMRC are currently discussing that point with advisers. My approach to the points that the hon. Gentleman made—and, therefore, the approach that the officials will take—is that I am not prepared to sanction further exemptions from what are very clear rules. The rules contain a clear exit—the election—but as the hon. Gentleman suggested, we have been prepared to remove double charges. When specific examples—not individual cases—have been provided that can be encompassed in the regulations and have the benefit of removing unintended consequences, I am prepared to consider them and I have asked my officials to do so.
	When we consulted on the proposals, they were not greeted favourably by the tax planning industry, but that is no surprise. It was busy selling schemes that we wanted to prevent it from selling. I did not expect industry representatives to beat a track to my door to say, "Thank you, Minister. We're really pleased you did that." My officials asked the industry whether we needed to consider transitional arrangements while schemes were unwound—to address the points that the hon. Gentleman made about the possibility of an unfair double charge. At that point, the industry claimed that unwinding was impossible, because the schemes were so complicated.
	Therefore, we came up with the simple proposition that the taxpayer could elect out of the scheme by a simple declaration to the tax officials that the scheme would no longer operate. The schemes did not have to be unwound and taxpayers did not have to pay for them to be unwound or pay to take advice on their unwinding. The taxpayers could sign a piece of paper, send it to HMRC and it was done. I thought that that was a good, simple way to solve the problem. However, this year, people are coming back to us and saying, "Hmm, we think we'd like to unwind. Can you give us general powers to unwind schemes?" My answer is no, for the following reasons.
	Call me a cynic, but I have a horrible feeling that the sudden desire to unwind is prompted by the discovery of a way to replan. I also think that election is a good and fair answer for all taxpayers.My understanding of the main thrust of the points made by the hon. Member for Runnymede and Weybridge is that he has been briefed that there could be unintended circumstances where double or unfair taxation may arise, and the desire to avoid that is his only motivation for the new clause. It is not because he wants to return to tax planning—to go back to go. However, the regulation-making power, which the House found somewhat controversial, allows the Government to do that. There are some valid cases, one of which the hon. Gentleman put today and which my officials are taking forward. The power to make regulations remains available so that HMRC can consider using it further, if advisers who favour the unwinding route can make a detailed case that it is designed specifically to reach one end—fairness to the taxpayer—and not to open up other possibilities. That can be achieved through decent dialogue between HMRC and advisers who are concerned about the issue. That is where we are.
	The hon. Gentleman does not need his new clause because the regulating powers provided enable the House to respond to detailed cases. As the arbiter on whether the regulations are made, I set a reasonably simple and straightforward test, which is the intent of the House: those who say they need such powers have to make the case for the powers and the regulations, and must demonstrate exactly which unfairness we need to address. If they can do that, and if they are open with HMRC, I shall certainly be prepared to give from the Dispatch Box the undertaking that the hon. Gentleman seeks and bring forward the exact details of precisely what is needed to address the perceived injustice. It will then be considered. But I will not give him an undertaking from the Dispatch Box that a general request for power to unwind—wherever that might take taxpayers and tax planners—would be granted, because it will not.
	I hope that the hon. Gentleman will see that powers exist and that opportunities for change are in the hands of taxpayers and their advisers, and the people who are advising him. If those advisers provide the details, they will be considered and if necessary regulations will be changed to ensure that the perceived unfairness does not occur. On that basis, I hope that he will not push the new clause to a vote, but if he decides to do so, regrettably, I shall ask my hon. Friends to oppose it.

Philip Hammond: I am disappointed that the Paymaster General has chosen to paint as bad people those who use trusts that were perfectly legal tax-planning devices when they were set up. As I said earlier, those people have come out with their hands up; they have accepted that the trusts did not work and they now want to exit from the system.
	The Paymaster General's remarks did not address the fact that the Government have already acted to offer relief to many of those people. We cannot have a situation where some of the people who set up trusts are bad people and do not deserve relief, while others are good people who can elect to escape from at least the economic effects of the arrangements that have been put in place.
	The Paymaster General reiterated my words in using the phrase "unintended consequences". I have not clearly understood from her remarks that those in this group of approximately 30,000 people, for whom it is not appropriate to use the route of an election, are the products—[Interruption.] The Paymaster Generals asks why it is not appropriate. I have given the two most important reasons: first, the possible impact on beneficiaries of children's trust if they die within seven years; and, secondly, the advancing to the time of the first death of the charge to inheritance tax when the taxpayers involved are a couple who make an election for a property that they hold jointly. That would have the disastrous consequence of causing inheritance tax to become payable by the widow or widower of the deceased at the time of the first death—a huge cash-flow problem that would almost certainly involve the forced sale of the house. That is why I am advised that the election process is simply not appropriate for certain groups of people.
	As the Paymaster General has spotted, I did not invent the new clause and the arguments that support it. We have been advised by the Chartered Institute of Taxation and the Society of Trust and Estate Practitioners, as the Paymaster General has. The arguments that I have used have already been made in detail both to the Paymaster General—

'In the Hydrocarbon Oil Duties Act 1979 (c. 5) section 6 (excise duty on hydrocarbon oil) there is inserted after subsection (1A)—
	"(1B) The Chancellor of the Exchequer shall publish a forecast based on the expected direction of international oil prices.
	(1C) When the average price per litre of a fuel listed in subsection (1A) above increases by more than 3 pence over any period of six months, the Chancellor of the Exchequer shall make regulations reducing the duty rate on that fuel and that reduction in fuel duty shall be based on the increase in the cost per litre accounted for by VAT.
	(1D) Whenever international oil prices rise above the level estimated by the forecast made in accordance with subsection (1B) above, indexed fuel duty increases shall be frozen until the international oil prices return to the forecast level.".'.
	—[Stewart Hosie.]
	Brought up, and read the First time.

Stewart Hosie: I beg to move, That the clause be read a Second time.
	We are seeking to amend the Hydrocarbon Oil Duties Act 1979 with the new clause, which, I am pleased to say, has the support of the Road Haulage Association as well as members of the Scottish National party, Plaid Cymru, the Democratic Unionist party, the Ulster Unionist party and the Social Democratic and Labour party. It is designed to deal with oil prices that are exceptionally high for various reasons and with exceptionally high pump prices for road fuel. It has no impact at all on expected revenue, because the mechanism would apply only when oil prices and revenues are above the Chancellor's forecast range or when the fuel price at the pump increases by more than 3p over a six-month period. As it applies only when fuel prices are abnormally high, it does not have any implications for the environmental benefits sought by the ongoing managed increase in duties.
	There is widespread recognition of the pain suffered by the road haulage industry. Bankruptcies in that sector are twice the average of other industry sectors. Hauliers' average running costs are 52p a mile—some right hon. and hon. Members will remember when petrol and diesel cost 52p a gallon. Competition from hauliers in Europe, driven by lower fuel prices elsewhere, have led to a massive reduction in the percentage share of cross-channel freight delivered and carried by UK hauliers. The industry and, indeed, domestic car users pay some of the highest fuel prices in Europe, driven by some of the highest taxes on fuel in Europe of 69 to 74 per cent.
	That is bad enough, but the biggest problem is the inability of businesses in particular to plan properly while fuel prices rocket. Unlike spikes in the past, those prices have stayed high for a long period. Our proposals for a road fuel regulator in proposed subsection (1C) respond to prolonged increases in the price of fuel at the pumps. If there were a rise in petrol and diesel of 3p a litre or more in any six-month period—according to my calculations, there have been three occasions since 2000 when that has happened to four-star petrol—our proposal would take the edge off the increases and minimise the impact on businesses and consumers. To give a little background, the first prolonged spike above 3p a litre for a six-month period occurred between January and July 2000. The price remained high and, if our proposal were operating, the regulator would have remained in force until December 2000. When the second spike occurred between September 2002 and March 2003 the regulator would have remained in place for one month until April 2003. The final spike in four-star prices occurred between April and October 2004, and the regulator would remain in place until the present time. We propose that the Chancellor would be required to reinvest the additional revenue that he receives from VAT on the higher pump price to lower the duty on fuel in such circumstances.
	As an illustration, the Automobile Association has done its own calculation based on unleaded fuel. It estimates that some six months ago the average price of the fuel was 80p.

Nadine Dorries: In my rural constituency, I represent many market gardeners, farmers and road hauliers who must battle adverse weather conditions as well as adverse pump prices. The new clause seems to involve a great deal of uncertainty, but what those people need is more certainty.

Adam Price: It is always a pleasure, and sometimes a challenge, to follow my hon. Friend the Member for Banff and Buchan (Mr. Salmond). The hon. Member for Rayleigh (Mr. Francois) referred to political co-operation across the islands and across differences of opinion on the constitutional future. Certainly, my constituents—farmers, hauliers and others—would be interested in the unholy alliance that is developing between the Front Benchers of the three main UK parties. The minority parties are proud to stand up for the interests of their constituents on this matter because of the crisis facing the haulage sector, which is of vital strategic importance in my area of Wales and in the constituencies of my hon. Friends.
	The haulage industry had another disappointment yesterday with the announcement that we would not have the distance-based road tax scheme that it has been promised and that would have helped to overcome some of the competitive disadvantages that the sector faces in competition with foreign hauliers. We need action on behalf of the haulage industry, because it is going to the wall in west Wales and parts of Scotland, Northern Ireland and, indeed, England.
	As we have heard, west Wales and the highlands and islands of Scotland have some of the highest petrol and diesel prices in Europe. In many areas, £1 a litre will soon be the norm, and we do not have the derogations from duty that are practised in some EU states. That is why we need some protection, and all that we are asking for in the new clause is a cap to provide some protection from the volatility of the international markets. Or will we allow the international oil markets to decide the fate of hauliers and other key sectors in our constituencies? That is not acceptable.
	I read the Financial Secretary's comments yesterday that the delay in the increase in fuel duty was caused by short-term volatility, but that is exactly what he said two years ago. When does short-term volatility become a constant feature of oil prices? That volatility has many causes—the increase in demand from China and problems in supply. There is an interesting debate about peak oil, and some are pessimistic and others optimistic about the oil reserves. The new oil reserves peaked in 1960, so discovery of oil reserves has declined. Volatility will be a long-term feature of the oil market and prices.
	Oil now costs some $60 a barrel, which is three times the $20 a barrel average of the past two decades. Some people talk of the possibility of a cold winter in the northern hemisphere pushing it up to $70 or $80 a barrel. Will we provide no protection for consumers and businesses in our markets? We need a smoothing mechanism, as the hon. Member for Eastleigh (Chris Huhne) suggested, so that instead of disruption and chaos we have a managed target price, set by the Chancellor. We should not allow a windfall tax to put onerous pressure on businesses and customers.
	The issue will not go away. Non-OPEC oil production will peak at some time in the next 10 years and then most of the world's oil reserves will be controlled by a small number of countries whose Governments are unstable and corrupt—I obviously do not mean Scotland. As we shift from a hydrocarbon economy to a new energy economy, we need to create a mechanism to manage that transition. We need a managed approach to our current reliance on oil, and the new clause presents a possible way forward.
	The Government need to act now. Instead of having a series of announcements about delays, let us have a regulated approach that will provide fairness, transparency and justice for consumers and businesses across the UK.

Alan Reid: High oil prices are clearly causing a serious problem in rural areas, especially in the islands where the price of petrol at the pumps is horrendous. Unfortunately, however, I do not think that the new clause will tackle the problem. When the hon. Member for Dundee, East (Stewart Hosie) proposed it, he admitted that it was less than perfect. I think that was SNP speak for "It won't actually work"—[Interruption.] The hon. Member for Banff and Buchan (Mr. Salmond) asks what is our alternative? It would be that we need to move away from taxes on fuel to a system of road pricing, with higher charges for urban motorways and very small charges for rural roads, especially in the islands, but I suspect, Madam Deputy Speaker, that if I started to explain our future transport policy, you would quickly rule me out of order and ask me to concentrate on the new clause.

Michael Weir: No, I have given way enough.
	I made the point in an earlier intervention that we are dealing with rural businesses and economies. In my constituency, there are many hauliers. They transport goods in and out of the area. As I said earlier, there is one rail line that goes up the coast. Theoretically, we could get goods to Arbroath or Montrose by rail, but we must still use the roads to get them from there to all the other communities in the constituency. There is no rail line up Glen Esk, Glen Isla or any of the other glens of Angus. They were all "Beeching-ed" many years ago by previous Governments. Road transport is necessary to get goods in, and the price of everything that comes into my constituency is affected by the price of fuel.
	Crucially, the price of everything that goes out of my constituency is also affected by the price of fuel. Manufacturing and other industries in Angus need to transport their goods to market and transport is one of their biggest costs. That is also true of industries in Northern Ireland, Wales and many parts of England. Something needs to be done to deal with the cost to industry in rural areas or we will see a leakage of those industries from rural areas to the conurbations.
	One problem is that hauliers have entered into long-term contracts with major producers—many of them are food producers in my constituency—so that the goods can be hauled to market or, as is more appropriate in many cases, to the central distribution warehouses for the major supermarkets. The hauliers have to set a price for a considerable period ahead. When they do not know what the price of fuel will be next week, never mind next year, it is difficult to set a contract price for the long term. Some of them have managed to set a sliding scale in the contracts because of the good will of their customers, but the effect is slight because no one can give away too big a change in margins.
	The whole point behind the fuel duty regulator as proposed by my hon. Friend the Member for Dundee, East (Stewart Hosie) is that it would provide certainty over a period. Businesses would be able to plan ahead and know what the fuel price will be for a set period. We would not face the sudden spikes that are so dangerous to the haulage industry and others in my constituency.

Michael Weir: The whole point is to smooth the price increases. The hon. Gentleman obviously does not understand the proposal, but there is no proposal from the Liberals. This is the only proposal before us that does something now. I would have thought that he would have been interested in doing something for the rural areas of Scotland and Argyll. My hon. Friend the Member for Na h-Eileanan an Iar (Mr. MacNeil) tells me that fuel now costs £1 a litre in the Western Isles. What does that do to industry? The situation must be the same in Argyll, and I am surprised that the hon. Gentleman is not supporting us. Perhaps I should not be, knowing the Liberals.
	The new clause is a genuine attempt to try to have some certainty for the foreseeable future and to let businesses flourish by letting them know what their costs will be. If we do not accept this or something similar, more and more businesses will go under and they will not only be haulage businesses. Many other businesses in rural areas will be affected. There have already been closures in these areas, as firms concentrate their factories near the centres of population. All of us could give examples of small firms in our constituencies that have fallen victim as employers concentrate their activities near the major markets or the bigger cities.

Alex Salmond: As I have told the Financial Secretary before, if the Treasury truly believed that argument, it would reduce duty to increase the VAT take. However, are those the same Treasury analysts who forecast oil revenues this year of £6 billion, and is he confident that that is an accurate forecast?

Richard Spring: I beg to move, That the clause be read a Second time.
	New clause 9 would compel the Government to introduce tax legislation to facilitate the introduction of real estate investment trusts as a collective investment vehicle for property in the United Kingdom. The Government have been good at announcing the introduction of REITs, but have so far failed to deliver the goods. As a result, investment has gone offshore.
	It should be noted that despite several announcements by the Government of tax legislation to give effect to REITs, such legislation does not appear in the Bill. That is due to problems involving the current method of taxation of overseas landlords, whereby rents payable to them are subject to a 22 per cent. withholding tax except when the landlord has the prior agreement of the Inland Revenue. The worry is that a REIT will effectively escape such a tax when paying a distribution to the overseas landlord. However, many other countries have REITs and have appropriate tax regimes for them.
	There is genuine concern that the current position is causing the property fund industry to locate elsewhere. There are now £3 billion-worth of listed property trusts in Guernsey that might otherwise be in the United Kingdom: that has been confirmed by Merrill Lynch investment managers. The quoted property investment trust market has increased from approximately £0.3 billion in 1998 to nearly £3 billion now, going from effectively 0 per cent. to 10 per cent. of UK listed real estate by market value. However, the market value of onshore trusts has remained nearly constant. Virtually all quoted property has gone offshore.
	In the United States, REITs are a commonly held investment vehicle. Japan launched them in 2001, France in 2003, and Germany is considering introducing them. It would be preferable if we could introduce a regime before Germany. Companies are effectively developing equivalent structures elsewhere. A major insurer established such a vehicle in Guernsey, complaining that it would have liked at least to have the option of making it a UK vehicle.
	In the US, REITs now own no less than $220 billion worth of real estate, of which $35 billion is residential. They have to distribute 90 per cent. of their income, and tend to have far greater and more consistent dividend yields than conventional shares. Given the ageing profile of the British population, that will be important, as pension funds have more retirees than future pensioners making contributions, and seek to move from having assets with potential growth to having income-producing assets.
	REITs tend to have different cycles from the bond and equity markets. They therefore make for prudent investment by individuals, pension funds and life assurance companies wishing to reduce risk by maintaining a diversified portfolio. REITs also tend to trade at near asset value, whereas current UK property groups tend to trade at a discount to net asset value, often of between 10 and 15 per cent.
	The longer it takes the UK to establish such a vehicle, the lower the tax take will be as more and more vehicles go offshore, and the bigger will be the loss to the UK economy. Perhaps one of the Government's concerns about REITs is that they produce high levels of income, and might be unwelcome competition for the other forms of income-producing investment that investors could consider: for example, the increasing amount of Government debt that the Treasury issues to finance the Government's Exchequer.
	If we turn to the history of REITS, the Budget of 2003 included announcements to improve the flexibility and efficiency of the commercial property market. The pre-Budget report of 2003 announced the consultation paper to be produced in the Budget of 2004, following on from the Budget of 2003. In the Budget of 2004, a consultation document was launched promoting more flexible investment in property, and seeking views on how a new property investment fund—a UK version of the successful US REITS—might be structured to meet the Government's objectives of further enhancing the liquidity of property investment, providing greater access to retail investors and encouraging expansion in the private rented sector. Of course, we have now come to the Budget of 2005.
	Accountants and actuaries often identify as one of the characteristics of the Government that Treasury announcements are made without supporting and adequate information on which they can make judgments, and often express anxiety publicly about the impact of Treasury announcements that are made without the supporting detail, given all the pressures that result on business and business decisions. It is curious that we have the reverse situation here—the Government have made announcements four times about REITS, but no specific date for introducing such vehicles has been brought forward.
	The British Property Federation is of the view that there will be no net tax leakage for implementing a REIT regime. The US experience is that REITs pay significant taxes other than corporate tax, such as business rates, stamp duty land tax and VAT, before any shareholder-level taxes. US REITS are widely held, and it should be noted that the US has rules to prevent overseas owners from controlling REITS to avoid US tax. As I shall indicate, Canadian research shows that such vehicles should produce a slight increase in tax yields in the longer term. We are therefore concerned by the Chancellor's reluctance to bear the possible short-term fall in tax revenues—the determining reason why the Government refuse to introduce REIT legislation—which is further discouraging capital investment from the United Kingdom.
	The US plans to get around concerns about US owners abusing the rules by having concentration limits. Withholding taxes, which were 30 per cent., generally had the habit of blocking and deterring foreign investment that would otherwise be welcome. In the late 1990s, the US Treasury reduced the high withholding taxes on REIT dividends. That applied to all newly negotiated treaties in which withholding taxes were lowered for investments below a certain threshold, typically to 15 per cent. As a consequence, the level of overseas investment in US REITS substantially increased.
	It should also be noted that external investors in UK property normally shelter their 22 per cent. tax charge under the current overseas landlord regime, typically by gearing up their investments. A 15 per cent. withholding tax rate would probably levy more tax than the 22 per cent. as the withholding could not be reduced by an overseas investor gearing up to buy shares in the REIT, especially given that REITS have tended to produce considerable income.
	The Canadian Institute of Retail Funds and Canadian Institute of Public and Private Real Estate Companies also undertook a very detailed and scientific study of similar issues around withholding taxes for REITS. It concluded that there would be an immediate reduction in tax yields, being the corporation tax forgone on dividends and capital gains, net of the tax collected through withholding. When taking into account that most of the value would generally be deferred to tax residents who would pay tax on their REIT shares and dividends, however, the result was a net increase in tax yields. Overall, therefore, the REIT vehicle would result, at best estimate, in a small increase in tax yields in the long term.
	On a wholly dispassionate point, it is difficult for people to retain a satisfactory return on their investments in dividend terms because interest rates throughout the world today are very low, and in many instances lower than in this country. Individuals go into REITs as a form of investment to capture yield. For example, the US experience shows that the average REIT yield in dividend terms is 5.13 per cent., whereas the Standard and Poor 500 stock index yield is 1.8 per cent. It is difficult for people to get a satisfactory return, and this is certainly one way of doing it.
	6 pm
	The National Association of Real Estate Investment Trusts in the United States recommends the following, based on the US experience, all of which we could reasonably include in UK tax law. The first recommendation is not to have a quoted requirement for REITs; the second is to permit gearing to reduce the level of withholding tax and distributions payable by REITs, with the sensible suggestion that we should have "safe harbour" levels for effectively tax-deductible debt—a principle worth considering throughout UK tax law.

Geoffrey Clifton-Brown: Will my hon. Friend not also press the Government on the following fact? If there were a greater market in commercial property—and undoubtedly there would be a more flexible market if REITs were introduced—the Government would also gain more in tax through increased business activity generated thereby, because leases would be granted more flexibly.

Richard Spring: I entirely agree. Indeed, in submissions made to the Treasury by the British Property Federation, those exact points have been spelled out.
	We are fortunate in this country to have a hugely successful and internationally recognised financial services industry, with a skills and knowledge base that is incomparably successful by international standards. We can be grateful that it exists, because as we all recognise, our manufacturing capabilities do not match our success in the financial services industry—and REITs represent an area of investment that the investment community wants to see on the statute book.
	The Government have accepted in principle that this is the right thing to do, but for reasons that are difficult to understand, they have been unable to come to a firm conclusion. I simply say to the Paymaster General is that there is no substantive disagreement on the principle, but we must accept that at this stage we need to fix a date for the introduction of REITs. That is exactly what the new clause is all about, and I hope that the Minister's response will give us some clarification of how we can move the process forward as rapidly as possible.

Rob Marris: I have three questions to ask the hon. Gentleman. As background, he cited the figures and the research from Canada, but as the House will know, Canada is 32 times the size of the United Kingdom and has twice as much house-building per capita per annum as this country does. What evidence does he have of the effect that REITs would have on house prices in this country, the availability of houses for home owners to buy, and the levels of rents both commercial and domestic?

Susan Kramer: Despite the comments of the hon. Member for Wolverhampton, South-West (Rob Marris), REITs are a largely non-controversial issue; indeed, there is consensus across the House that they are a desirable instrument. For the ordinary consumer—the retail investor—REITs are important because they are easy low-cost mechanisms for entering and exiting the property market. They would allow people to diversify their investment portfolios, which is what we want, to enable people to manage risk better within their investments.
	For the Government, there is a desire to achieve a closer alignment between the taxation of direct and indirect property investments. I fully recognise that there are issues that the Government must tackle—such as definition, legal issues, issues of withholding and foreign investors, and the ring-fencing of ownership and management versus the actual activities that take place on property. Surely, as we look around the globe, not least at Australia and the USA, there are plenty of examples of how all those issues have been tackled. The new clause is, from the perspective of the Liberal Democrats, essentially a wake-up call. It is about saying to the Government that they should please get a spur into Treasury officials, of whom we see so many in and out of the Box day after day, and get something sorted so that REIT investments can be made properly available to people in the UK.

Ivan Lewis: May I first welcome the new attachment of the Opposition parties to the concept of REITs? It was, in fact, this Government who introduced the potential benefits of a REIT system and we never heard any proposal to that effect from Opposition parties.
	New clause 9 follows a simple pattern. Opposition Members have said that they want to focus the Government's mind on making more rapid progress in solving the problems associated with REITs. The problem with the new clause is that it invites the Government to introduce regulations before 31 October, irrespective of whether, before that date, we have resolved all the difficulties and concerns that hon. Members have accepted as authentic and legitimate. How can a particular date be specified for a set of proposals when there is no way of being certain that it is possible to resolve the outstanding problems relating to them? Doing so would be entirely irresponsible.
	What we have said throughout is that it is our objective and desire, if we can resolve the problems, to introduce proposals for the next Finance Bill—and that remains our position, but we cannot guarantee it. If, in the course of our discussion and consideration of the issues, it continues to become apparent that the principles necessary to underpin a REIT scheme cannot be secured, we will have to take that into account before taking any final decisions. The message about the need to make rapid progress on REITs is, frankly, a message that the Opposition have no need to keep telling the Government.

Ivan Lewis: I entirely agree with my hon. Friend that consistency is not a trademark of the Opposition, as we have seen throughout our debate on the Finance Bill. Conservative Members are telling interested parties outside that they are aware of the importance of REITs, but the Government have already made that clear on several occasions. We have also placed on the record, in the context of the Budget and the Finance Bill, our belief in the importance of REITs and the fact that we support them in principle. We have also acknowledged that, if at all possible, we need to make speedy progress with them.
	As I have said, the problem with the new clause is that it confines the necessary debate, discussions and consideration of the genuine difficulties that we face in reaching a decision to a period before the end of October this year. It is easy for the Opposition to propose such amendments, but it would be entirely irresponsible for the Government to accept a time scale that we have no way of being absolutely certain of meeting.
	There is no need for Opposition Members to continue to reiterate that we all support the concept of REITs in principle. Nor is there any need for those Members to tell us that it needs to be done as quickly as possible. We differ in that we are not prepared to compromise on the fundamental principles that we have outlined time and again. We have talked about the desirability of REITs, but also about some of the genuine obstacles and barriers to achieving them.
	I say to those who have a genuine interest in putting a sensible and credible REITs framework in place that the credible thing to do is to work with the Treasury and the Government to ensure that the obstacles and difficulties are resolved. If that happens, we can put REITs on the statute book very quickly. On that basis, I ask the hon. Member for West Suffolk (Mr. Spring) to withdraw new clause 9.

Ivan Lewis: I cannot accept the amendment, but I want to reassure the hon. Gentleman about some of his reasonable concerns. First, he will accept that a purpose test needs careful consideration to ensure that it hits the right target and can be effectively enforced. The amendment would pre-empt the further discussion and work required before such a test could be introduced. The wording of the amendment restricts the application of the rule to situations in which the investor's only purpose in owning 10 per cent. or more of a fund is tax avoidance.
	That would make it simple for investors to get around the rule. It is almost always possible to find some other reason, however trivial or irrelevant, for owning 10 per cent. or more of a fund. To prevent sidestepping other-purpose rules, the Bill stipulates that tax avoidance must be the main purpose, or one of the main purposes, behind entering into transactions. Without such protection, it is unlikely that the different tax treatment rule would ever be applied.
	To police a combined 10 per cent. and purpose test would inevitably lead to greater compliance costs for the industry, investors and HMRC than would be incurred by a straightforward rule that applies a different tax treatment based simply on percentage ownership of a fund. The experience from other-purpose tests is that proving that tax avoidance was the only purpose is difficult and time consuming. It also leads to uncertainty for the investor while the position is resolved.
	I hope that the hon. Member for Eastleigh (Chris Huhne) finds the next bit helpful. We recognise that some investors may end up owning 10 per cent. or more of a fund inadvertently. For example, that might happen if a substantial investor redeemed his units. To ensure that investors who find themselves over the limit unwittingly are not affected adversely, the regulations will provide a period of grace for matters to be reversed. I have said that before, but I am happy to repeat it today.
	As with all the regulations planned for authorised investment funds, officials will continue to consult stakeholders on the detail of how the relaxation in respect of the sort of inadvertent breach that I have outlined will operate. We believe that the 10 per cent. rule is a simple percentage rule that applies a different tax treatment to investors who meet or exceed it. Qualified investor schemes are restricted to sophisticated investors who will know when that different treatment will apply to them. Such investors will also know exactly what the consequences will be if they meet or exceed the limit. To add a second leg that requires a subjective test of motive would remove those certainties.
	I hope that my response goes some way towards answering the concerns voiced by the hon. Member for Eastleigh in respect of those people who might find themselves to be inadvertent victims of the proposals. We are making it very clear, on the record, that the regulations will be sensitive to investors' circumstances. Given what I have said, I hope that the hon. Gentleman will feel able to withdraw the amendment.

Mark Field: As the Economic Secretary will appreciate, the amendment covers some of the ground that was cantered over in Committee, but that is unavoidable. We are attempting to ensure that statutory instruments are required for the inserted section 431A of the Income and Corporation Taxes Act 1988 that appears in schedule 9. One of those SIs would be to ensure that as life assurance company taxation is driven off regulatory returns, the tax rules can be altered where necessary where there is a change in the regulatory rules that has a consequential effect. The second is set out in paragraph 3 of schedule 9, which we debated at some length in Committee and is fundamental to how such companies are taxed. It effectively allows the Inland Revenue to alter the tax sections that determine either the rate of tax on which a life assurance company pays its profit or the allocation of investment return between non-taxable pension business and taxable life assurance. Life assurance companies are subject to a tax charge that combines two factors, one being a charge on the shareholder profit that the company makes and the other a charge on the investment return on the assets that are backing life assurance companies. That is effectively then charged to the policyholder.
	As the Economic Secretary will be aware, there are no limits on what the Treasury can include in the secondary legislation, and we believe—and the amendment tabled by the Liberal Democrats suggests that they agree—that that gives far too much power to the Inland Revenue and too little potential protection to the taxpayer. We argued in Committee that there should be, as a matter of course, parliamentary scrutiny as to whether the proposed changes should be introduced by statutory instrument and the limitations placed on what should be contained in that instrument.
	There is also a concern that a double charge might inadvertently arise following the implementation of the statutory instrument, in one of two ways. Either the investment return on the attributed estate could be included in the pension business computation and taxed as proposed in an earlier draft SI as taxable life business—the latest SI, released as recently as 17 June—indicated that the regulations would be written so that that would be the case. We would like the Minister to confirm that. Alternatively, any investment return on attributed estate that is now taxed would be taxed again when taken to shareholders' funds. That is an obvious double charge that remains, and that is why we tabled an amendment in Committee, which was discussed at length.
	In Committee, the Economic Secretary said:
	"The context is that the industry and the Government have had an ongoing dialogue in an attempt to reach a satisfactory agreement and conclusion. In the context of those negotiations, that consultation and that debate, significant agreement has been reached between the industry and the Government on a practical and realistic way forward. Given the discussions between the industry and the Government, it is slightly surprising that in Committee we should find that the industry is in a sense encouraging the Opposition to challenge an agreement that it made with the Government. There has genuinely been a listening process and a two-way dialogue."—[Official Report, Standing Committee B, 30 June 2005; c. 252–53.]
	Without querying the Government's good faith, I have to say that the insurance industry does not regard that as a fully accurate statement. I am sure that it was not intended to mislead, but the industry feels that although there have been discussions and some of the more outlandish proposals, such as taxing mutuals as having shareholder profit, have been dropped—it appreciates that there has been some movement—it does not regard the final outcome as entirely satisfactory. The industry rightly considers that such amendments should be made by way of primary legislation and should not be introduced in what is effectively—partly because this is the second Finance Bill this year—in a rush. The industry also believes that the Government should be even-handed and ensure that life assurance companies will not be taxed on more than 100 per cent. of their investment return, which is the potential downside of the double charging to which I have referred. In the view of the industry, the regulations remain in a draft state. The Inland Revenue has known about the tax planning in question for almost a decade, so it cannot reasonably claim that the rules have to be introduced in a rush.
	The Economic Secretary also claimed that there could be no double charge under the proposed regulations as the investment returns on a non-profit fund cannot be deferred through the use of an investment reserve. Two specific points arose from the insurance industry briefing. First, the industry feels that non-profit funds can have investment returns and, in years of high investment return, should maintain them as a matter of reasonable actuarial prudence. Secondly, the income on such attributed estates may need to be maintained in the longer-term fund due to agreements that may be made with the regulator, which leaves open the possibility of a double charge, to which we referred. I hope that issue can be addressed in the final form of the regulations.
	I do not want to go over old ground and repeat the arguments, as I am sure that the Minister is fully aware of all of them. Given the continued uncertainty, however, many experts in the insurance industry remain unconvinced of the necessity to enact the change in the current year, rather than awaiting the outcome of a proper review of the apportionment system. We hope, therefore, that he will give serious consideration to taking on board the amendments that we have tabled. In any event, we shall be interested to hear what he has to say, although I appreciate that he may want to reply relatively briefly as many of the issues of principle were debated at great length in the Standing Committee.

Dawn Primarolo: I beg to move, That the Bill be now read the Third time.
	I would like to take this opportunity to thank all the right hon. and hon. Members who participated in the Committee of the whole House and the Standing Committee. The quality of the contributions produced good, productive debate, animated exchanges and some improvement in the substance of the Bill.
	As my right hon. Friend the Chancellor outlined in his Budget back in March, the Government's economic objective is to build a strong economy and a fair society, in which there is opportunity and security for all. The long-term decisions that the Government have taken—giving independence to the Bank of England, new fiscal rules and a reduction in debt—have helped to shape economic stability, which in turn has created the platform for building prosperity, achieving social justice with security and opportunity for all, and maintaining investment in public services. This Bill contains measures to strengthen further stability while sustaining enterprise and ensuring fairness.
	I have made this point to the House before and I will do so again because I believe it goes to the heart of this Bill: a fair tax system is one in which everyone pays their fair share. The protection of tax revenues is imperative both in providing improvements in efficiency and enabling increased investment in public services. Tax avoidance undermines the ability of the Government to deliver their objectives and imposes increased burdens on those who pay their fair share of taxes.
	Tackling avoidance is not incompatible with maintaining UK competitiveness. In fact, avoidance undermines fair competition. Turning a blind eye while some companies obtain an unfair advantage by exploiting avoidance schemes is not the same thing as supporting and maintaining UK competitiveness.
	As I said to the hon. Member for Runnymede and Weybridge (Mr. Hammond) in Committee, competitiveness is based on the question of whether the tax system is modern and fair and whether it has appropriate rules that respond to the challenges that it faces, so that it discharges its responsibility to all taxpayers by ensuring that there is fairness in the system. As we have seen, the Bill's provisions will do just that. They reflect the Government's resolve to ensure that our tax system is both fair and competitive.
	In the Budget 2004, the Government introduced disclosure rules to tackle tax avoidance. Those rules have revealed that several areas of the tax system are at risk from high levels of tax avoidance. The Bill will close several schemes of which we have been made aware, including schemes involving the exploitation of arbitrage, employee securities, VAT avoidance and financial avoidance. The measures that achieve that make up much of the substance of the Bill and have been subject to much scrutiny in Committee.
	On arbitrage, increasing globalisation presents new opportunities for the few who attempt to evade their UK obligations. Clauses 24 to 31 and schedule 3 introduce legislation to target avoidance involving tax arbitrage. The measures catch contrived avoidance structures that seek to achieve a UK tax advantage and will apply only when a company is involved in a scheme that increases UK tax deductions because of the exploitation of arbitrage.
	Alongside the 2004 pre-Budget report, I made a statement to the House stressing how successive Governments have been perpetually presented with ever more intricate arrangements designed to avoid income tax and national insurance on the rewards from employment. Clause 12 and schedule 2 are a carefully focused response to such avoidance schemes. The measures will effectively target arrangements that are used to disguise cash bonuses and thus avoid tax and national insurance. It is important to remember that without prompt and decisive action, around £500 million in tax and national insurance would be at risk every year. The Government estimate that around £2 billion of payments were going through such schemes in 2004–05.
	I should also remind the House that in my statement alongside the pre-Budget report I made it clear that the Government's objective was to close down such activities permanently, initially by closing down schemes that had been identified by Her Majesty's Revenue and Customs. Furthermore, I made it clear that should further attempts be made to frustrate that intention, legislation would be introduced to combat the problem, where necessary, with effect from 2 December 2004. The response is thus fair and proportionate, given the substantial amount of revenue at risk and the history of the previous attempts made by some taxpayers and their advisers to get around legislation that was aimed at stopping their avoidance schemes. I must stress that only those who, despite these warnings, choose to avoid their responsibilities and pass a heavier burden on to other taxpayers will be affected.
	Furthermore, the disclosure rules are an integral part of the Government's strategy to ensure that there is fairness. They target the information deficit on which tax avoidance is based. They enable Her Majesty's Revenue and Customs to act faster and with a more targeted response to abuse of the tax system, thus providing an early warning about new avoidance schemes. Clause 6 and schedule 1 will improve the effectiveness of the rules by drawing on the experience of disclosures up to this juncture, extending the definition of tax advantage and simplifying the requirements on business to disclose schemes so that if a new listed scheme is designated, the tax authorities will be able to act swiftly.
	The Bill introduces important measures to promote fairness and confront tax avoidance while maintaining our competitiveness and providing certainty to businesses, allowing them to keep pace with the opportunities presented by the fast-evolving global economy. It will help to develop the macro-economic stability that is essential to our future productivity, growth and stability. It will support business while ensuring fairness, and will enable the country to sustain and build on a competitive enterprise-based economy, allowing for security and opportunity so that everyone benefits from growing prosperity.
	The Finance Bill sets in statute the measures proposed in the Budget to enable the United Kingdom to respond to and meet the challenges of a global economy. I commend it to the House.

Jack Straw: With permission, Mr. Speaker, I should like to make a statement on the Olympics. I do so in the absence of my right hon. Friend the Prime Minister at Gleneagles and of my right hon. Friend the Secretary of State for Culture, Media and Sport in Singapore, and in my capacity as Chairman of the Cabinet Committee on Britain's bid.
	All of us know the news; each of us will be able to recollect for the rest of our lives exactly where we were when the president of the International Olympic Committee, Jacques Rogge, read out those magical words: "The city which will host the 2012 games is the city—of London." But my right hon. Friends and I thought that the House would welcome this early opportunity to send its congratulations to all those involved in what is a magnificent achievement for the United Kingdom as a whole in securing not only the Olympics but the Paralympics.
	Our first thanks must go to the International Olympic Committee for the confidence that it has shown in the United Kingdom's bid and we should salute the strength of, and support for, the other four bids on the final shortlist.
	When the original discussions took place over two years ago as to whether the Government should back a bid for 2012, there was enthusiasm in principle, but much anxiety about whether in practice London could win. We knew even then that we faced extremely tough competition. It is a tribute to the extraordinary dedication and imagination of all those involved to have taken the project from just a dream to the reality that it has become from today. The work of Lord Coe, Keith Mills and their team has been immense. Barbara Cassani set the foundations, but Lord Coe has taken the inspiration and energy that made him one of the world's greatest ever athletes and channelled it into building a powerful bid for London. His performance here, as it was on the track, has been phenomenal. On behalf of all Members, I pay tribute to him and to all those involved with him.
	London's bid was built on a special Olympic vision. That vision is of an Olympic games which will be not only a celebration of sport but a force for regeneration. The games will transform one of the poorest and most deprived areas of London. They will create thousands of new jobs and homes. They will offer new opportunities for business in the immediate area and throughout London.
	But they are not just a games for London. They will leave a legacy for the entire country. Olympic competitions will be held in Glasgow, Cardiff, Weymouth, Birmingham, Manchester and Newcastle.
	One of the things that made our bid distinctive and successful is the way in which it reaches out to all young people in two important respects: it will encourage many more to get fit and to be involved in sport and, whatever their physical prowess, to offer their services as volunteers for the Olympic cause.
	The nation has united behind this vision. The latest polls show that 80 per cent. of people backed the bid and more than 3 million people sent individual pledges of support. There has been a terrific partnership between the Mayor of London, Ken Livingstone, and the Greater London authority; the chairman of the British Olympic Association, Craig Reedie, and all his colleagues; and Mike Brace, chairman of the British Paralympic Association, and his colleagues.
	Hon. Members from across the political spectrum have contributed to the success of this bid. Leading the Government's efforts have been the Prime Minister and my right hon. Friend the Secretary of State for Culture, Media and Sport. I know that I speak for all colleagues when I say that I have personally witnessed, as have we all, her extraordinary personal commitment in tirelessly championing London's cause. Officials at every level in her Department, supported from elsewhere in Government, have worked fantastically hard and with great skill.
	My right hon. Friend the Secretary of State and my right hon. Friend the Minister for Sport have lobbied hard in Singapore. They were joined there on behalf of the official Opposition by the hon. Member for Faversham and Mid-Kent (Hugh Robertson) and on behalf of the Liberal Democrats by the hon. Member for Bath (Mr. Foster). On behalf of the Government and the bid team, I thank hon. Members for the enthusiastic cross-party support for the bid.
	Today we can celebrate. From tomorrow, we start to realise the Olympic vision in our bid. The Prime Minister has already announced the appointment of my right hon. Friend the Secretary of State for Culture, Media and Sport as Minister for the Olympics. Lord Coe will become chair of the organising committee. Keith Mills will help to oversee the transition. Before the summer recess, the Government will introduce a Bill to set the statutory framework that we need to ensure the delivery of a successful games. Work to improve London's transport network will continue. A new Olympic lottery game will start soon. Tenders for Olympic-related work in east London have already been submitted and major contracts that relate to the games and the broader infrastructure will be concluded in the next few weeks.
	Securing the games is one of the greatest international prizes for any nation. Like every hon. Member, I have always been proud of my country but today I am prouder than ever.

NHS (Lincolnshire)

Mark Simmonds: I am delighted to have secured this important Adjournment debate on Lincolnshire's national health service at a time when a vital range of services and facilities across the county appear to be under threat as a result of cost-cutting measures necessitated by a funding shortfall.
	The United Lincolnshire Hospitals NHS Trust is one of the largest hospital trusts in the country and serves approximately 641,000 people. Last year, the trust treated 175,000 accident and emergency patients, 500,000 out-patients and nearly 100,000 in-patients. The trust provides a comprehensive range of hospital-based medical, surgical, paediatric, obstetric and gynaecological services from nine hospitals across Lincolnshire, two of which are in my constituency.
	Pilgrim hospital in Boston is a large district general hospital, with a 24-hour major A and E department and a range of specialities. The other hospital in my constituency is the Skegness and district hospital, which is a 39-bed community hospital and has a 24-hour A and E department that deals not only with local residents but with a high tourist influx throughout the whole year. The two hospitals treat about 73,000 A and E cases and 150,000 out-patients each year. The East Lincolnshire primary care trust, which covers my constituency and the other eastern part of Lincolnshire, caters for 275,000 residents of east Lincolnshire, providing a range of services including GP services, dental services, community pharmacy services and community nursing services.
	I requested today's important debate as it has been announced that, across Lincolnshire, approximately 300 health service jobs are under threat, and five wards may be closed—one at Grantham and district hospital, two at Lincoln City hospital, and two at Pilgrim hospital in Boston in my constituency. In addition, up to three surgical wards will become day-case or short-stay wards. These proposals are understandably causing significant angst both in my constituency and elsewhere in Lincolnshire.
	The Lincolnshire health service is already struggling to cope, and I fear, along with many people working within Lincolnshire's NHS, that these cutbacks would have a profound effect on the provision of local health care available to my constituents and the other people who reside in Lincolnshire. Staff at Pilgrim and Skegness hospitals, as well as health care workers and professionals across the county, are working tirelessly to provide the best possible service under challenging circumstances and conditions, and I would like to take this opportunity formally to thank them for all their hard work. Unfortunately, health care professionals and local residents across Lincolnshire fear that the provision of health care will suffer if jobs are lost and hospital wards are to close.
	The exponential growth of Lincolnshire's population has put great strains on public services such as the NHS. From 1991 to 2001 Lincolnshire's population increased by 10 per cent. compared with the national average of 2.7 per cent. This is a significant—and, I believe, unrecognised—increase. The figure includes not only people retiring to Lincolnshire from the midlands, as they have done traditionally, but those moving to Lincolnshire from the south of England to take advantage of the significantly disparate house prices. The problems facing Lincolnshire's national health service are different from those in many other areas. Our county covers a comparably large and predominantly rural area, we have no motorways, and our public transport system is limited.
	As well as a growing population, we have an ageing population. Some 22 per cent. of the population of east Lincolnshire is over 65, compared with 16 per cent. of the total UK population. Additionally, there is a considerable seasonal influx of tourists to the east Lincolnshire coast. There are significant pockets of socio-economic deprivation and a transient population who often work in the low-wage, low-skill agricultural and seaside economic sectors. All those factors mean that our community is heavily reliant on the local NHS sector, but the Government have failed to recognise Lincolnshire's specific needs and have thus underfunded the primary care trust and hospital trust, which has resulted in the situation that we face today.
	Those factors have put added pressures and strains on Lincolnshire's national health service, but the service has received inadequate funding from central Government to maintain and expand its facilities. As a result, the NHS in Lincolnshire reported an £8.1 million deficit for 2004–05 and faces a £20 million shortfall in 2005–06. The United Lincolnshire hospitals trust and the East Lincolnshire PCT have considered ways of balancing their budgets and eliminating the shortfall, but have unfortunately concluded that they have no alternative but to make cutbacks to front-line services. I warned the House in a debate on 16 January 2003 that Lincolnshire's health service was in financial difficulty. Indeed, I cited the example of the West Lincolnshire primary care trust, which at the time had run out of money for that financial year and subsequently had to cancel many surgical operations.
	During the 2004–05 financial year, the East Lincolnshire primary care trust had a specific shortfall of £4.5 million against an estimated revenue allocation level below the national average of £12 million a year. Finally—at last—the Government have recognised their consistently inadequate and unfair funding of Lincolnshire's primary care trusts and recently announced significant increases from April 2006. East Lincolnshire PCT will receive an increase of 13.6 per cent. in 2006–07 and of 12.4 per cent. in 2007–08. The requisite figures for the West Lincolnshire primary care trust are 9.5 per cent. and 10.5 per cent., and the figures for the Lincolnshire South West Teaching primary care trust are 9.1 per cent. and 10.3 per cent. Although that additional money is welcome, it will arrive too late to stop the cuts that are being talked about at the moment. I shall come back to what I believe should be done later.
	It is important to put on record the interrelationship between primary care trusts and hospital trusts, because the underfunding of Lincolnshire's PCTs has a severe knock-on impact. The primary trusts have allegedly failed to fund adequately out-of-hours and GP services, so patients go to hospitals directly, unnecessarily, or via inappropriate referrals. As there is little provision to transfer patients out into the community, significant numbers of people are occupying surgical and medical beds. At Pilgrim hospital in Boston alone, 10 per cent. of the beds are occupied by people who should and could be in the community, rather than in acute beds. That happens for a variety of reasons, such as delayed discharges and because people are waiting for intermediate care, waiting to go to other, already full, hospitals or waiting for rehabilitation in the community. I accept and support the fact that there is an urgent necessity to increase community care facilities, such as emergency care practitioners and specialist nurses, and for investment in intermediary care facilities. Such facilities are not there today.
	I cannot fathom how closing five wards throughout Lincolnshire, including two in Pilgrim hospital in my constituency, which amounts to 58 beds, will improve the situation. It is inexplicable. Indeed, a recent hospital trust press release highlights an existing significant shortage of beds that puts pressure on A and E services. It says:
	"much of the pressure experienced in A & E is due to emergency admission patients waiting for beds".
	The beds are not there.
	In addition, there are concerns about the out-of-hours service across the country, and Lincolnshire is no exception. Although I recognise that the scheme may allow doctors to spend more time in their surgeries rather than driving long distances in the evening and the early morning, there are fears that the out-of-hours new practice is undermining GPs' contracts and contacts with the community.
	Some GPs in Lincolnshire fear that the new system may even be dangerous, putting patients' health and safety at risk as a result of inadequate funding allocated to the new scheme. Only last month, the independent Healthcare Commission was asked to look into East Lincolnshire PCT's out-of-hours service, following specific GP criticism. Once initial inquiries are completed, the commission will decide whether it needs to press ahead with a formal investigation. I await, as my constituents do, its decision with interest.
	I have one final issue to tackle—the new consultant contract. Sold as a plan to improve service provision by rewarding consultants fairly for all activities undertaken, it was poorly resourced from the outset. Indeed, it has achieved the inverse of the original objective. There is now a drive to curtail consultant activity down to a base level to save money by reducing consultant pay. That is inevitably having a detrimental impact on patient care and was a significant contributory factor to the shortfall within the United Lincolnshire hospitals trust. It is incredible that the Department of Health, as well as the strategic health authority, failed to foresee the problem.
	In conclusion, will the Minister assess the viability of allowing the primary care trust to draw down money from next year to fund the wards at Pilgrim hospital as intermediate care wards so that no beds are lost, so that there is no diminution of service for my constituents and other Lincolnshire residents who use Pilgrim hospital, and so that the primary care trust has a facility within Pilgrim hospital to take the patients out of acute and medical wards, so freeing them up and ensuring that there is no impact on other essential services in Pilgrim and other hospitals across Lincolnshire?
	The Government of course blame the funding shortfalls on those working in the NHS. Will the Minister therefore explain why, if, as the Secretary of State stated on the "Today" programme, the funding shortfalls are all a mistake of the managers in the NHS, there have been no resignations by those responsible for the mismanagement? I am not talking just about Lincolnshire, because the problem is becoming prevalent in hospital trusts across the country.
	The proposals to cut services and jobs in Lincolnshire's NHS are of significant concern not just to those who use the NHS, but to those who work in it. They will have a detrimental impact on health care provision and a negative impact on morale, and will exacerbate recruitment problems, which the Minister will realise are already serious in much of Lincolnshire. As a result of bed shortages, it may put routine and regular surgery at risk without community care facilities in place first. The Government were warned, but they failed to act in time to stop those cuts. The people in Lincolnshire now hope that they can take action to stop the ward closures and to stop the talked-about job cuts.

CORRECTION

Monday 4 July 2005: In col. 85, under Ayes, insert "Jeff Ennis"; and in col. 137, under Ayes, insert "Jeff Ennis".